Chinese finance giant Zhongzhi files for bankruptcy

BEIJING: Chinese asset management giant Zhongzhi Enterprise Group has filed for bankruptcy and was unable to pay its debts, a Beijing court said on Friday.

The development comes weeks after police opened an investigation into the group after the debt-ridden financial behemoth declared itself insolvent. According to a statement published by a Beijing court on WeChat, Zhongzhi applied for “bankruptcy liquidation because it cannot pay off its debts that are due, its assets are insufficient to pay off all debts, and it clearly lacks the ability to repay in full”.

The Beijing No.1 Intermediate People’s Court said it “found that the application meets the reasons for bankruptcy specified”, and on January 5 “ruled to accept the bankruptcy liquidation application”.

In late November police in Beijing, where the group is headquartered, said they had opened an investigation into unspecified “alleged offences”, adding that they had taken measures against several suspects. Zhongzhi, which is little known outside financial spheres, had earlier declared itself insolvent with its arrears estimated at nearly $66 billion, according to a letter to investors cited by local media.

During China’s real estate boom, many developers used Zhongzhi to finance their projects.

The company managed assets worth more than one trillion yuan ($141 billion), according to investment bank Nomura. But the group has been caught up in China’s property crisis, leaving it now unable to repay investors. Zhongzhi’s bankruptcy raises fears of far-reaching consequences for China’s financial system following the downward spiral of property developer Evergrande, whose troubles continue to take a toll on the country’s real estate sector and the economy.—AFP